Revaluing US gold reserves comes with pros and cons

Fort Knox’s undervalued bullion could help the nation with its debt if it is given a more up-to-date price tag, some say. Others think it could lead to a global monetary realignment.

Al Majalla

Revaluing US gold reserves comes with pros and cons

Toufic Chanbour

last update on 06 Nov 2025

The United States is once again embroiled in a spirited debate surrounding the potential revaluation of its massive gold reserves, with advocates arguing that it could help alleviate the nation’s substantial debt and restore confidence in the dollar. Beyond that, they believe it could pave the way for recalibrating the global monetary order and repositioning American financial leadership.

This renewed interest in gold stems from a convergence of critical developments, not least gold prices having soared to historic highs, with central banks across the world acquiring it at an accelerated pace. The other big factor is the US national debt having now surpassed $38tn, with little indication of retreat. Against this backdrop, revaluing gold is being floated as a potential fiscal lifeline. Proponents see it as a way to raise capital without increasing taxes or issuing new debt.

Forgotten treasury

The roots of America’s gold holdings lie in the Gold Reserve Act of 1934, introduced under President Franklin D. Roosevelt. The act followed Executive Order 6102, through which the federal government seized monetary gold from private citizens in exchange for compensation based on the official price of $20.67 per troy ounce.

Following this, the Treasury and financial institutions were barred from redeeming dollars for gold. A portion of the confiscated bullion was placed under the care of the Federal Reserve and stored at Fort Knox in Kentucky, now seen as a symbol of latent national wealth. Additional reserves were secured within the vaults of Federal Reserve Banks in New York, Denver, and West Point.

A year after the initial confiscation, a second revaluation lifted the official gold price to $35 per ounce. This adjustment increased the Treasury’s gold-backed wealth by 69%, while also devaluing the dollar by around 41% in relation to gold. In the early 1970s, President Richard Nixon oversaw a third revaluation, fixing the official gold price at $42.22 per ounce.

That figure has remained unchanged in the Treasury’s accounts for over five decades, despite the steep rise in market prices on the global stage. The result is a significant accounting discrepancy that leaves one of the United States’ most concrete financial assets severely undervalued in official records. This distortion continues to cloud the true fiscal potential embedded within the nation’s gold reserves.

Reuters — Gold bars on display at the Museum of Natural History in New York, August 19, 2019.

Strategic instrument

According to the Federal Reserve, the US Treasury holds 261.5 million ounces of gold. Valued at just $11bn under the outdated pricing formula, this figure significantly understates the true worth of this vast reserve of 8,133.46 metric tonnes—the largest national stockpile in the world.

Interestingly, this could be revalued through a simple accounting measure, and such an adjustment would not require congressional approval. Under the authority granted by the Gold Reserve Act of 1934, the President can revise the valuation to reflect current market conditions.

These could be drawn from benchmarks such as the London Bullion Market, the COMEX exchange, or a higher value determined by the President. The resulting accounting gains, potentially worth hundreds of billions or even trillions of dollars, would be credited to the Treasury in a dedicated account at the Federal Reserve. This would immediately strengthen the government’s fiscal position.

President Trump has called for an audit of the nation's bullion holdings at Fort Knox, but no formal revaluation policy has been adopted so far

The Federal Reserve has issued accounting guidance confirming that the Secretary of the Treasury (Scott Bessent) has the power to issue gold certificates backed by the department's holdings. These certificates may be traded without requiring the physical transfer of gold and can be monetised if needed. Additionally, the Treasury retains the right to redeem these certificates at any time, with the ability to withdraw the corresponding currency from circulation. This provides a flexible tool for managing both gold reserves and overall monetary liquidity.

Governance of liquidity

Revaluing the United States' gold reserves presents a compelling strategy for fortifying the Treasury's balance sheet. It offers a means to reduce the debt-to-GDP ratio and narrow the fiscal deficit without resorting to new borrowing, tax rises, or inflationary money creation. The impact could alter global currency markets, challenge the dollar's preeminence, and prompt a review of the international monetary system. It may also influence strategies for preserving wealth in a period of uncertainty.

Historically, gold revaluation has proven an effective fiscal instrument. In the 1930s, it helped the Treasury inject liquidity into the economy by expanding the money supply. Critics at the time regarded it as a covert method of printing money, arguing that it risked fuelling inflation, destabilising markets, and subordinating the role of the Federal Reserve by placing monetary policy in the hands of the Treasury. This tension persisted until the landmark Treasury-Federal Reserve Accord of 1951, which established the central bank's independence in conducting monetary policy.

Fast forward to today, and market analyst Alasdair Macleod has warned that declining foreign appetite for American debt could soon trigger a currency crisis. If it did, that might compel a dramatic revaluation of its gold reserves to preserve the credibility of the dollar and ensure financial stability. If President Trump were to invoke the Gold Reserve Act, a global surge in gold prices could heavily benefit heavily indebted states with large bullion reserves, but it may also lead to a simultaneous decline in fiat currencies, potentially kickstarting a period of far-reaching and unpredictable financial disruption.

Global rebalancing

Increased investment in gold by several nations (particularly members of the BRICS bloc) therefore becomes more logical. China has revised the regulatory framework of the Shanghai Gold Exchange, positioning it as a future regional—and potentially, global—centre for gold custody and trading. This is part of broader efforts to hedge against systemic shocks, including a collapse in the international monetary system.

History underscores a clear lesson: physical ownership of gold is a shield for preserving purchasing power during periods of monetary upheaval and structural transition. Nevertheless, not all analysts agree that gold offers a definitive safeguard for national currencies. Critics contend that even substantial reserves, when weighed against the volume of currency issued, may prove insufficient to prevent depreciation. The Turkish and Lebanese lira provide cautionary examples—currencies nominally backed by gold reserves that have nevertheless experienced severe devaluation.

Financial strategist Luke Gromen argues that the dollar-based monetary system, which has been dominant since the mid-20th century, is approaching collapse. He cites soaring public debt and persistent fiscal deficits as symptoms of its decline. Gromen advocates for the reintroduction of gold as a central element in the international financial architecture. He sees it not as an outdated relic but as a neutral reserve asset that could anchor a more balanced and resilient global order.

Monetary analyst Jim Rickards and Swiss wealth manager Clive Thompson propose targets. According to their estimates, an increase of $4,000 per ounce in the gold price could eliminate $1tn of US debt; $15,000 dollars per ounce could inject nearly $4tn in liquidity; and a revaluation to $25,000 dollars per ounce could unlock vast resources, transforming public finances without increasing the debt burden.

However, such a move carries considerable risk, not least the potential impact on the dollar's value and its role in global markets. As more countries explore asset-backed currencies, particularly those tied to physical gold, the world may be on the verge of a fundamental shift in its monetary arrangements. These changes would have far-reaching implications for global trade, capital flows, and economic diplomacy.

Luke Sharrett / AFP — The United States Bullion Depository stands on Fort Knox in Kentucky. Built in 1936, the depository is said to hold gold bullion reserves belonging to the US Treasury Department.

A strategic asset

For the time being, the revaluation of US gold reserves remains speculative, as no formal policy has been adopted. What has emerged, however, is a directive from President Trump to audit the nation's bullion holdings at Fort Knox. This rekindled the debate. In February, Bessent said: "Over the next 12 months, we will monetise the assets listed in the federal budget and extract value from them. We've studied global best practices."

Two weeks later, he told Bloomberg that gold revaluation was "not what I meant". He later described gold as "an asset that cannot default, cannot suffer deficits, and is immune to government failure," adding that it is "a strategic asset in a world undergoing sweeping reform and foundational monetary transformation".

Physical gold remains increasingly scarce as a strategic reserve. While derivatives offer lower-cost exposure, the underlying bullion has, for decades, been pledged, leased, and lent—raising uncertainty about how much remains with clear legal title and verified origin. This is reflected in data from the London Bullion Market Association, which now reports delivery times of up to eight weeks. Many think it is worth the wait.

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